G1 VENUES LIMITED FOR ORDER UNDER SCHEDULE 1 TO THE ARBITRATION (SCOTLAND) ACT 2010 TO SET ASIDE A DECISION OF AN ARBITER DATED 10 MAY 2013

OUTER HOUSE, COURT OF SESSION

[2013] CSOH 202

P483/13

OPINION OF LORD MALCOLM

in the Petition

G1 VENUES LIMITED

Petitioners;

For orders under Schedule 1 to the Arbitration (Scotland) Act 2010 to set aside a decision of an arbiter dated 10 May 2013

________________

Petitioner: Martin QC, Dunlop; Balfour + Manson LLP

First Respondents: Delibegovic-Broome; DWF Biggart Baillie

Second Respondents: No appearance

27 December 2013

[1] This is an appeal against a decision of an arbitrator, who held that he had no jurisdiction to proceed with the arbitration. G1 Venues Limited (the petitioners) are the proprietors of subjects on the ground and basement floors at numbers 25, 27 and 27A Royal Exchange Square, Glasgow. The first respondents (hereinafter referred to as the respondents) are Glenerrol Limited. They own property on the first, second and third floors at numbers 21 to 29 Royal Exchange Square. There was no appearance for the second respondents. The subjects are regulated by a deed of conditions entered into in 1952. It allows the proprietors of any portion of the subjects to convene a meeting of all proprietors, at which a majority of those present can make regulations considered necessary with regard to "the preservation, cleaning, use or enjoyment of the common property, or any part thereof; all which regulation shall be binding on all the proprietors, whether consenters or not."

[2] In about April 2011 a draft regulation was prepared relating to the use of what was termed the "front common property". The petitioners operate a licensed bar on the ground floor of the subjects, which includes an outdoor pavement café area. They resisted the proposed regulation on the basis that it would interfere with their use of the pavement. A meeting of proprietors took place to discuss and determine the proposed regulation. Following a vote, the regulation was passed.

[3] Condition fifteenth allows for an appeal to an arbiter (now termed "arbitrator" under the Arbitration (Scotland) Act 2010) by a proprietor, the arbiter then being entitled to sustain or vary or annul the regulation. An appeal "must be intimated to the arbiter not later than 60 days after the meeting at which such...regulation...is made, failing which the right of appeal shall be lost." The arbiter is to be the Dean of the Royal Faculty of Procurators in Glasgow, whom failing, such arbiter as shall be appointed by the sheriff.

[4] The resolution was passed at a meeting held on 26 April 2011. Within the 60 day period, by letter dated 22 June 2011 agents for the petitioners forwarded a letter to the Dean of the Royal Faculty of Procurators. It was headed - "G1 Group plc 21-29 Royal Exchange Square and 74 Buchanan Street, Glasgow". The letter began as follows:

"We act on behalf of G1 Group plc who are the owners and proprietors of the subjects known as 25, 27 and 27A Royal Exchange Square, Glasgow. ...Our client wishes to appeal against a regulation voted upon and passed by the majority of the proprietors at a meeting on 26 April 2011...In the first instance this letter should be taken as formal intimation by G1 Group plc exercising their right to appeal to you as arbiter in relation to the said regulation...A copy of this letter has been intimated by recorded delivery and first class post to all of the proprietors as undernoted together with the factors of the property...Without prejudice to the rights of the parties under the deed of conditions, and for the avoidance of doubt this notice constitutes a notice beginning the arbitration in accordance with rule 1 of the Scottish Arbitration Rules...".

In fact G1 Group plc (who are the petitioner's parent company) are not proprietors of any of the subjects covered by the deed of conditions. The petitioners are the owners of the relevant portions of 21/29 Royal Exchange Square. The letter was intimated to, amongst others, the respondents and their agents. In their answers in the arbitration the respondents averred that:

"The appellants did not intimate any appeal to the arbiter within the 60 day time limit. Rather an appeal was intimated on behalf of a company called G1 Group plc. G1 Group plc do not, and did not at that date, own any heritable property at numbers 21-29 Royal Exchange Square".

[5] The petitioners and respondents were ordained to lodge notes of argument. Subsequently the arbitrator assigned a debate on the respondents' pleas to the competency of the appeal and to his jurisdiction. The debate was heard on 3 July 2012. Both parties were represented by counsel. On 10 May 2013 the arbitrator issued his decision. He stated that the appellants had not validly intimated an appeal within the 60 day period. He noted that the appellants relied upon the said letter which stated that the agents acted on behalf of G1 Group plc, who were the owners and proprietors of the subjects. He observed that counsel for the respondents categorised this statement as "a clear error." In the arbitrator's view it would be apparent to anyone reading the letter that the party on whose behalf it was written was G1 Group plc, and that its purpose was to exercise the right given to a proprietor in terms of the deed of conditions to appeal a decision such as the regulation passed on 26 April 2011. At paragraph 52 the decision continued as follows:

"It was accepted that the appellants and not G1 Group plc are the proprietors of heritable subjects...at Royal Exchange Square, Glasgow. As proprietors of these subjects the appellants and not G1 Group plc would have an entitlement to appeal against the regulation by intimating its intention to do so to the arbiter within 60 days of the meeting on 26 April 2011. The letter (of 22 June) did not amount to such intimation by the appellants. Viewed objectively, the letter did not provide intimation of an appeal by the appellants. An arbiter receiving the letter would take from its terms that G1 Group plc, a proprietor of part of the heritable subjects at 21 to 29 Royal Exchange Square and 74 Buchanan Street, Glasgow, was exercising its right to appeal against the resolution passed on 26 April 2011. G1 Group plc are not however proprietors of any part of these heritable subjects and as such have no right of appeal against the resolution. The letter is not intimation of an appeal on behalf of the appellant."

[6] The arbitrator noted that the letter was in clear and unequivocal terms. He said:

"Received by the reasonable arbiter it would be understood as an intimation of an appeal by G1 Group plc purporting to be a proprietor entitled to appeal in terms of condition fifteen. Whilst counsel for the appellant sought to rely upon the correspondence passing between the appellants and the first respondent as providing context to the notice served in the name of G1 Group plc, there is no suggestion on record that the arbiter was aware of this correspondence or had sight of it at the time the letter was received. As such the arbiter required to construe the letter objectively having regard to its terms. In such circumstances the reasonable arbiter would have concluded that the party seeking to intimate the appeal was G1 Group plc and not the appellant."

As to further procedure the arbiter said:

"Having reached the conclusion which I have on the competency of these proceedings, I do not consider it is open to me to hear further legal argument on the issue of personal bar or indeed any other issue raised by the parties in their respective pleadings."

He considered that, properly construed, condition fifteenth required an appeal to be intimated by a proprietor within 60 days, failing which the right is lost. It was not open to the respondents to waive or be personally barred from maintaining that the appeal is incompetent in circumstances where the arbiter had no jurisdiction due to a failure to meet the requirements set out in the deed. The arbitrator decided that he had no jurisdiction to interfere with the regulation. He therefore upheld the respondents' preliminary pleas.

[7] The petitioners now ask the court to overturn that decision in terms of the powers granted in the 2010 Act, and in particular in the Scottish Arbitration Rules contained in Schedule 1. They provide that an arbitrator can rule on his own jurisdiction (rule 19). Any party may object on the ground that the arbitrator does not have jurisdiction in relation to the subject matter of the proposed arbitration (rule 20). An arbitrator has power to rule on a jurisdictional objection independently from dealing with the subject matter of the dispute, or delay a ruling until the stage of an award on the merits (rule 20(4)). In the present case the arbitrator chose the former route and, in the light of his decision, and as required by rule 20(3), he ended the arbitration. In terms of rule 21 the petitioners have appealed to the Outer House, the decision of the Lord Ordinary being final.

[8] Separately the petitioners rely upon rule 67, which allows a party to appeal to the Outer House against an award on the ground that the tribunal did not have jurisdiction to make the award. Since this arbitration was ended before any consideration of an award, I have difficulty in identifying the relevance of this rule. In addition, and again separately, reference is made by the petitioners to rule 68, which allows an award to be challenged on the basis of a serious irregularity. Similar comments apply. If at the outset there is a challenge to the jurisdiction of the tribunal, which there was in the present case, the court's power to intervene is contained in rule 21. Rule 67 and following deal with challenges to the outcome of an arbitration, as opposed to preliminary decisions on the jurisdictional validity of the tribunal itself. Before turning to the merits of the case, I should note that, at an earlier stage, Lord Woolman refused leave to the petitioners to pursue a legal error appeal in terms of rules 69 and 70.

[9] It is worth dwelling on the arbitrator's reasoning which led to the conclusion that he had no jurisdiction. He considered the issue from the standpoint of what an arbitrator would take from the terms of the letter on its first reading; he, at that point, being unaware of the background. For example, he would not appreciate the error made by its author. He would take the letter at face value, and assume that G1 Group plc owned the subjects and that they were being presented as the intended appellants. As the arbitrator said, "viewed objectively" the letter did not provide intimation of an appeal by the party entitled to do so, namely G1 Venues Limited. The reasonable arbitrator reading the letter would understand that the party seeking to intimate the notice was G1 Group plc. In the event it was agreed that G1 Group plc are not proprietors of any part of the subjects and thus have no right to invoke the arbitration clause. The arbitrator concluded that the appellants had failed to intimate an appeal within the 60 day period - and thus he had no jurisdiction to embark upon the arbitration.

[10] Once one approaches the question at issue in the manner adopted by the arbitrator, the answer is settled. Plainly after reading the letter the arbitrator would assume that the notice was being sent on behalf of G1 Group plc, and that it was G1 Group plc who, as the purported owners of the subjects, wanted to bring the appeal. But did the arbitrator adopt the correct approach? If one is entitled to look at the matter more broadly, and from a different standpoint, factors pointing the other way come into focus. One might ask - given the relative informality of the notice requirements in the arbitration clause, does it matter that an error was made in naming the parent company of the owners of the premises, rather than the proprietors themselves? How is the notice to be construed? Does the mistake render it invalid - or was the letter sufficient for the purposes of what was intended by the parties to the deed as set out in condition fifteenth? Would the letter mislead the other parties to the dispute? Would they understand it as intimation of an appeal by the owners of the subjects anxious to overturn the resolution relating to the pavement café area? Is it important to note that in all other respects the letter was a sufficient and timeous notice for the purpose at hand, and that it had been received by all relevant parties? Is an absence of prejudice relevant to the proper outcome?

[11] As to the identification of the reasonable recipient for these purposes, I consider that it would be preferable to view matters through the eyes and minds of the other parties to the dispute, not least since there may be potential for the operation of personal bar based on their conduct - and in terms of rule 1, the arbitration begins when the appeal is intimated to them? Usually, the arbitrator will have no knowledge of the background to the dispute referred to him, and, as will be discussed, the reasonable recipient is assumed to be aware of all relevant circumstances.

[12] As one might expect, there are many decisions dealing with similar issues arising in a variety of contexts, with the ultimate decision depending upon the particular context and circumstances of the case. That said, some general themes emerge.

(1) A notice of this kind is to be construed objectively by reference to how a reasonable reader, who is aware of the circumstances and context of the notice, would understand it. In other words, the meaning or intention of the notice is not to be determined in a vacuum, nor by reference to someone who is uninstructed as to the relevant background. The decision-maker should exercise common sense having regard to all the circumstances of the case (Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749).

(2) The degree of formality, technical precision and strict accuracy to be required can depend upon the proper construction of the parties' intention as expressed in the relevant deed - including the nature and purpose of the notice provision (Muir Construction Ltd v Hambly Ltd 1990 SLT 830). So, on this basis, one might ask whether the parties to this deed intended that a mistake of the kind made here would invalidate the notice?

(3) If there is an error in the name given for the party presenting a notice, that is unlikely to invalidate the notice unless the error would mislead the other parties (Prudential Assurance Co Ltd v Smiths Foods Ltd 1995 SLT 369).

(4) The power to refer a dispute to arbitration is different in character from a unilateral power to bring a contractual relationship to an end (Scrabster Harbour Trust v Mowlem plc 2006 SC 469). The implication is that it is easier to excuse omissions or errors in the former category of case.

(5) Different considerations arise if a notice is served on the wrong party (Ben Cleuch Estates Ltd v Scottish Enterprise 2008 SC 252) - but this is not such a case. In Ben Cleuch the court observed that many of the cases "concerned the different question of how a notice, given to the correct party but containing erroneous information on other matters, would be understood by the correct recipient" (paragraph 64).

[13] The whole background leading up to the letter of 22 June 2011, including the correspondence passing between the parties and their agents, indicates that the reference to the parent company rather than G1 Venues Limited was a mistake which would not mislead anyone who had knowledge of the circumstances and who was aware of the purpose and intention of the notice - namely to allow the aggrieved proprietors at Royal Exchange Square to challenge the resolution relating to the pavement area by the procedure set down in the deed of conditions. For the respondents Ms Delibegovic-Broome submitted that the jurisdictional argument under rule 21 is essentially the same as that put forward in the context of the legal error appeal, for which leave was refused. However the rules for granting leave for legal error appeals are restrictive - hence the refusal - whereas in respect of jurisdictional challenges, such as under rule 21, no leave is required. I consider that I am not prevented from considering the rule 21 appeal on its merits - indeed I am bound to do so.

[14] Counsel for the respondents relied upon the arguments presented to the arbitrator as summarised at paragraphs 15 - 25 of his decision. Considerable weight was placed upon the decision in Gray Aitken Partnership Ltd v Link Housing Association Ltd 2007 SC 294, and on the proposition that the error in the present case goes to the heart of the proceedings. Gray Aitken Partnership involved a proposed amendment to the instance of a summons which deleted the name of the pursuing company and substituted that of another company. It was argued that to allow the introduction of a new pursuer would defeat the operation of a contractual limitation period, which had expired prior to the proposed amendment. It was held that the action was raised in the name of a corporation which did not have title to do so. Although there was a similarity in the names of the two companies, there was no suggestion that this was a case of error of transcription. It was not a clerical error, and it was not a case of the misnaming of a single corporation. The wrong company had been chosen. The mistake was said to be on "a matter of substance going to the identity of the person suing." The court therefore followed a well-established line of authority preventing the substitution of the correct pursuer after the expiry of a time limit.

[15] While there are some similarities in the general circumstances, in my opinion the decision in Gray Aitken Partnership is of little or no assistance in the present case. It concerned an attempt to cure a radical defect in court proceedings outwith a limitation period. The jurisdictional issue before the arbitrator turns on a decision as to whether the letter of 22 June 2011 satisfied the requirements of the arbitration clause in the deed of conditions. This is a very different question from that arising in Gray Aitken Partnership, and also from the issue addressed in another decision relied upon by the respondents' counsel, namely The Overseas League v Taylor 1951 SC 105. In my view care requires to be taken when the court is referred to decisions concerning mistakes in formal court proceedings in the very different context of errors in commercial documents and notices of the kind under consideration. In Overseas League it was confirmed that every case will depend upon its own facts and circumstances, and, unless precise accuracy is clearly required, generally the court will not be swayed by "technical or immaterial mistakes."

[16] In my opinion, the error here, far from going to the heart of the proceedings, can be regarded as a technical or immaterial mistake, which would not mislead the respondents, nor the arbitrator once he was informed of the full facts. Applying the general principles or themes derived from the cases which I outlined earlier, I conclude that the error as to the identity of the proprietors of the subjects at Royal Exchange Square did not invalidate the notice, hence the arbitration proceedings were timeously invoked. This is not the kind of case where exact precision or formality was intended as a precondition to the validity of a notice under condition fifteenth. Apart from the error as to the name of the heritable proprietors, everything else about the notice and the procedure followed was wholly satisfactory. The reasonable recipient of the letter would not be misled, unless he was ignorant of the factual background. In my opinion the arbitrator misdirected himself by concentrating only on the impression which an arbitrator would gain when opening the letter. I prefer the view that when deciding upon his own jurisdiction, he should have considered the reasonable reaction of the other parties to the dispute. In any event, whoever may be identified as the reasonable recipient of the notice, he is understood to be aware of the factual background. Furthermore the arbitrator did not consider the intention of the parties to the deed in respect of the requirements for notices under condition fifteenth.

[17] In these circumstances I do not require to deal with an alternative submission presented by Mr Martin QC on behalf of the petitioners relating to personal bar - nor with whether an appeal is open under other parts of the Scottish Arbitration Rules (though I have expressed my reservations on that). I will uphold the rule 21 appeal against the arbitrator's decision and remit the whole matter to him to deal with the merits of the dispute. Despite the now long delay since the passing of the resolution, I understand that the issue remains live between the parties.

Addendum

[18] Over ten months elapsed between the debate and the arbitrator's decision. Those acting as arbitrators should keep in mind that the founding principles of the 2010 Act include that arbitrations should be resolved without unnecessary delay.